Think differently to save cash instead of saving taxes this year

By Greg Crabtree, CPA

Every business owner knows the drill; you made a profit this year so you need to spend your cash to save on taxes. Try to think differently this upcoming year to “save cash” not “save taxes.”

The inherent flaw in spending your cash is that you have to spend a dollar to save 40 cents in tax, which just seems like a bad idea. You come up with excuses to spend money you think you would have spent anyway—you buy new computers, some extra supplies, a new vehicle because you heard you can “write it off.”

The point is that if you did without those costs up to December, maybe you did not need to spend it after all! Most successful entrepreneurs spend a dollar at the last possible moment it is needed.

Build wealth or save taxes?

You can only build wealth from “after tax” income, so every attempt to lower your taxes lowers your ability to create wealth. The number one key performance indicator of wealth creation is “how big of a check did your write to the IRS.”

If you did not write a big check, you either cheated or you did not make any money—both are bad. Do not pay more taxes than you should, but you should be focused on building wealth above savings taxes.

What if I am cash basis?

For those who are a cash-basis businesses, you can easily fall into the trap of draining your cash paying off vendors at year end. While this seems enticing, you eventually take it to the illogical extreme and have such a huge amount pushed forward it causes you to make sloppy decisions at year end.

Here are just a few of the issues that you could encounter:

•Bank financing. Your year-end financials are more important than ever these days. By focusing on taxes instead of good business fundamentals, you distort your balance sheet at year end and spend the next year explaining why your balance sheet looks bad at December so you can get your line of credit or bonding renewed.

•Missed opportunities. Because you dumped all of your cash in December, it takes longer than you think to build it back in January and February. By not having cash available to start new projects, you delay or miss out on new opportunities. To delay acting on an opportunity wastes a day of potential productivity that can never be recovered.

•“Deferring Taxes” versus “Saving Taxes.” Did you really save taxes or did you just defer them? Be honest with your language when you spend your year-end cash. It is not saving taxes unless you are saving at a high rate this year and you pay a lower rate in the future.

Not likely to happen. Most entrepreneurs defer taxes at year end and push their rates down into the lower brackets to end up paying at a much higher rate in the future when they have kicked the can as far down the road as they can.

•Borrowing money to finance that year-end equipment purchase. This is the ultimate tax trap. You borrow $100,000 to buy that new piece of equipment (that could have been delayed) and you end up taking the expensing election on the equipment. Inevitably, this purchase pushes you down into the 20% or lower bracket.

The only way to repay debt is to make after-tax profit. To make enough profit to repay the loan, it pushes you into the higher brackets and you end up paying close to 40% tax to generate enough cash flow to get out of debt (if you are lucky).

A better way to think

You need to approach taxes as the logical outcome of a profitable business that is your primary wealth-building engine. These are the keys to make this happen:

•Owners wages. Set your wages out of the business at a market rate for the job you have in the business. Then live off of that wage. Do not fall into the trap of consuming the profits of the business.

•Get profitable with the business you have. Once you properly set your wage as an owner, your net income gives you a true picture of the profitability of your business. If you are not profitable, the key is to make all labor productive and eliminate any labor that does not add value. You have to get your current business model profitable before you grow.

•Grow your own capital. Once you are profitable, retain after tax business profits until the business is fully capitalized. One definition of being fully capitalized is having two months of operating expenses in cash with nothing drawn on a line of credit. A business that has two months of cash can act on opportunities as they come up and you do not need to “get permission” from your banker.

•Get shareholders healthy. Once the business is fully capitalized, you can then take distributions to get your personal finances healthy. Get out of debt first (yes, that means all debt… including your home!), and then build up your emergency fund.

•Strategically redeploy profits. Once your business and personal finances are stable, then you can make strategic decisions about the after-tax profits of the business and decide if you want to grow the business larger or just continue to harvest the profitability of the business.

•Beware of “consumption cancer.” Everything you buy owns a piece of you and creates a financial drag. If you learn to live off your wages and leave the profits of the business for wealth creation, you have mental clarity of what produces wealth, what is investing and what is consumption. If you set a lifestyle target before you have the income to act on it, you will stand a better chance to control consumption.

It is time for entrepreneurs to get back to fundamentals and build profitable businesses that do useful things and grow your own capital. Stable businesses are the ones that create jobs that last and build a strong economy that can weather the storms of the market.

Greg Crabtree has worked in the financial industry for more than 30 years and founded Crabtree, Rowe & Berger, PC, a CPA firm dedicated to helping entrepreneurs build the economic engine of their business. In addition to serving as the firm’s CEO, Crabtree leads the business consulting team—helping clients align their financial goals with their profit model and their core business values. He is the author of Simple Numbers, Straight Talk, Big Profits! He can be contacted through www.seeingbeyondnumbers.com.

By Polly White

To paraphrase an old saying, employees are not your greatest asset—great employees are your greatest asset. Whether your organization is large or small, make sure you set the stage for their success by creating a positive first impression by implementing these five “musts”:

1. Have a plan. The difference between a worker who becomes productive quickly and one who languishes is often how well they are oriented to their new company. The first hours and days of an employee’s new career are the time when they become acquainted to the requirements and expectations of their job, the culture of the organization and where and how they fit into the company.

You can greatly increase the speed at which your employees become fully productive by having a personalized orientation plan in place for their onboarding. The plan should balance time spent learning about the organization and their coworkers’ responsibilities with his or her specific job duties.

It is not necessary that their first hours be spent filling out the myriad of employment-related forms. This may be convenient for HR, payroll or accounting, but does not create the best first impression. While the employee will eventually need to fill out certain forms, most federal and state requirements allow the new employee and your company several days to complete the task. Spending your first hours creating a friendly, comfortable and productive experience for the employee is a better use of time.

2. Have a place for your new employee to call their own. Whether the employee will have a desk, a locker, a workstation, or a peg on the wall, you should have it labeled, clean and stocked with all of the equipment the employee will need to do his or her job. Nothing says, “We really want you to be happy and productive” like a well-appointed workstation.

When desks and workstations are left empty for any length of time, two things happen. First, any useful equipment, office supplies or gadgets seem to walk away. Second, the empty desk becomes a dumping ground for stacks of papers, files and other debris. The day before the new employee is to arrive, take a few minutes to restock the workstation and clean off unnecessary clutter.

3. Introduce them to their co-workers. Most businesses provide new employees with the standard tour and introduction. While this is a step in the right direction, there are ways to increase the benefit to the organization. Spend at least part of the first day celebrating the arrival of the new employee.

Have coffee with everyone on the team, allowing time for socializing and rapport building. If possible, add a donut or other snack into the mix. There is nothing like food to help with bonding and creating great memories.

4. Choose carefully when involving others in the onboarding process. Watch out for the “curmudgeon buzzard”— the longer-term employee who feels obligated to swoop in on your new employee and explain to them in great detail why coming to work in your organization may be the biggest mistake of their career. They peck away of the employee’s confidence regaling their new colleague with stories of times when management was unfair or unkind to the rank-and-file.

The curmudgeon buzzard carries a great deal of baggage with them that must be unloaded on the unsuspecting newbie. They are only effective, however, if they can poison the new employee before he or she has fully formed his or her opinion of the company.

Keeping the buzzards away from your new hires during the first few hours or days of their employment will allow the new employee to form a favorable impression of your company—one that will be hard to change. Coach the new employees yourself or assign them to employees who will represent your company in its best light. The rewards will be long lasting.

5. Outline what the new employee needs to accomplish to succeed—then set them up for success. Finally, explain to your employee what you want them to accomplish in his or her first days on the job. Understanding exactly what you want them to do and how you will measure their success will increase the new employee’s confidence and the likelihood that you will get great performance.

Make sure the tasks you select are ones that 1) will be part of the employee’s routine assignments, and 2) are very doable. Remember, you want the employee to succeed in the early days so that they will be eager to take on the more difficult work that lies ahead.

Polly White is a principal at Whitestone Partners. She has more than 20 years of experience working with companies to improve the skills, behaviors and attitudes of their workforce. Her career has included roles in administration, human resources, curriculum and employee development. She is a noted author, speaker and instructor and has worked for companies ranging from small start-ups to Fortune 100 corporations. She can be reached through www.whitestonepartnersinc.com.

By Jolly Backer

Employee performance is an issue that concerns every entrepreneur. While a high employee-turnover rate can be costly to a business, so is having employees who don’t work up to their potential, or who have lackluster job performance. Just about every business across the country can benefit from taking measures to improve employee performance.

By improving employee performance, businesses will have a much easier time meeting the goals they have set, as well as reducing employee turnover and improving employee satisfaction rates.

Here are five ways to improve employee performance:

1. Change the environment. Often, employee performance is in line with the environment of the company. Making sure the workplace environment is positive, goal-oriented, and supportive will help to motivate employees. Start by looking at what needs to be improved in your workplace environment.

2. Improve communication. Whether the boss isn’t listening to employees enough or isn’t providing feedback, there may be room for improvement in communication. Those who communicate well with their employees will automatically motivate them to do more.

3. Provide training. Not having enough training costs companies a lot of money. The money that is invested in proper training and tools to do the job will be well worth the investment. When you invest in employees, they are better able to do their job, and will invest more deeply in meeting the company’s goals.

4. Get healthy. Obesity and health issues cost employers an estimated $73 billion or more per year in increased healthcare costs and lost productivity. Helping employees get, and stay, healthy will also help improve productivity. One way to do that is to ensure there is access to healthy snack and food options in the workplace.

5. Share goals. Employees will have a difficult time helping their employer reach business goals if they don’t know what they are. All businesses should have goals for growth or service, and should share them with their employees, which will likely motivate them to help the company reach its goals.

Taking steps to help improve employee performance will pay off. In an effort to help employees get healthy, many workplaces are replacing old, unhealthy vending machines with new ones offering healthier options. Doing this provides more nutritious food options, which will give workers a healthy energy boost while at work, while also helping them reach fitness goals, which will improve overall work performance.

Jolly Backer is chief executive officer of Fresh Healthy Vending, a company that is revolutionizing vending machines by filling dual-climate-controlled machines with healthy, natural food options, such as 100-percent juices, fresh vegetables, fruits, smoothies, and yogurts. She can be reached through www.freshvending.com.

By Cindy Bates

When was the last time you fielded a work call from the sidelines of your child’s sporting event or while in line at the grocery store? Chances are it wasn’t too long ago, considering the fact that an increasingly mobile marketplace is slowly but surely unraveling the sense of “office hours” and making it possible to conduct business in far more places than ever.

Not only has it become possible for you to work anytime, anywhere, but the ability to work remotely has actually become a business imperative, even for small and medium-sized businesses (SMBs).

A recent survey conducted by Microsoft and Ipsos Public Affairs gauged the opinions and attitudes of 1,285 information workers in 15 U.S. markets toward telework at their businesses. The results indicate that telework is becoming more than just a corporate perk for SMBs.

More than half of SMB information workers (59%) say their companies provide access to tech support for working remotely. Additionally, 39% of respondents report that their company has a formal telework policy, and 72% of those surveyed indicate a positive preference for remote working.

A crucial ingredient for success

The statistics point to a growing acceptance among SMB decision makers that their success depends in part upon their ability to mobilize employees. Indeed, failing to embrace remote working and the technologies that support it could result in lost business opportunities, not to mention dissatisfied employees, clients and customers.

Millennials in particular have come to expect flexible work environments, and this means SMBs will face increasing expectations of telework options from their employees, while external audiences will demand more real-time responsiveness and access to information.

Yet, SMBs do have some catching up to do when it comes to capitalizing on flexible work arrangements and making the most of technologies that support remote working. On average, SMB information workers work remotely 3.2 days per month, even though they would prefer to do so eight days per month.

A win-win situation

When SMBs embrace remote working, it’s rare that one side gains more than the other, since telework provides a host of benefits to employees and employers alike. The primary reason to telework, as cited by the survey respondents, is to counteract transportation challenges, such as escalating fuel prices and long commutes.

Additional reasons for and benefits of remote working included striking a better balance between work and home priorities, increasing productivity and needing to complete unfinished work.

Employers who support remote-working scenarios also stand to gain, since they acquire access to a larger talent pool that stretches beyond their immediate geographies and reap the benefits of more productive employees. Employers also might find that remote-working policies enable them to reduce overhead costs, since having fewer employees in-house can significantly reduce office space requirements and energy expenses.

Furthermore, giving employees the ability to conduct business outside the office often means getting more face time with customers and partners, a bonus that can sharpen an SMB’s competitive advantage.

Developing your telework plan

Each business’s remote working policies and arrangements will vary, depending on the nature of an organization’s services and products. For example, a coffee shop will always need employees present during business hours, as the functions of food service demand the physical presence of employees. But, with the right technologies in place, coffee shop employees also could easily conduct behind-the-scenes tasks, such as accounting and marketing, from remote locations.

Therefore, as you begin or refine the process of developing your business’s remote-working strategy, consider the following, while also keeping in mind that every business is unique and there is no one-size-fits-all remote working scenario:

Does your company have a formal or consistent policy around telework? If not, make steps to form one. Establishing telework policies will help employees better understand their privileges and limitations and will also set a foundation for technology implementation.

What are your business’s internal and remote technology capabilities? For instance, how easily can your employees communicate and collaborate with one another inside the office, and do they experience the same capabilities outside the office environment? Incorporating internal collaboration tools and leveraging cloud-based software that’s accessible anywhere that employees have Internet connectivity will enable them to conduct business with greater efficiency and speed both in and out of the office.

How secure are your internal and remote systems? In an effort to increase accessibility and enable instant collaboration, many business decision-makers err by relying on public networking or social media platforms, even though these solutions are not appropriate venues for the exchange of sensitive ideas and information. Therefore, invest in communications technologies with heightened security protocols, always prioritizing the integrity of your business’s information rather than getting sidelined by free solutions that can’t guarantee the protection your business needs to succeed.

For today’s SMBs, the good news is that technologies that support telework are rapidly advancing and are also becoming increasingly affordable. There’s never been a better or more pivotal time for SMBs to capitalize on the new world of mobile work.

Cindy Bates is vice president of Microsoft’s U.S. SMB organization where she is responsible for the company’s end-to-end SMB sales and marketing efforts, including SMB strategy; business development; regional field sales; and national distribution sales, channel marketing, and customer marketing. Bates is an 11-year Microsoft veteran and blogs regularly at www.microsoftbusinesshub.com, where you’ll find technology tips and resources related to remote working.

By Chris Bryan

Are you struggling to see the benefits of your lean initiatives? If so, you’re not alone. You started your lean journey with the expectation that the benefits would flow to the bottom line. Unfortunately, the early financial numbers may not be what you expected.

Many companies abruptly take an exit from their lean journey when early indications don’t show expected benefits. Implementing the principles of lean is a long-term initiative, however, and will ultimately provide a significant competitive advantage—but it will test your vision and leadership mettle.

Lean principles

The goal of implementing lean principles is to find and eliminate waste along the value stream. Most companies appoint a lean champion. Employees are trained and lean teams are formed to map key production processes. This process is called value stream mapping.

The objective is to identify steps and resources that add no value to the consumer of your product. Once non-value added steps are identified, the value stream map is redesigned and waste in the process is eliminated. Production planning changes dramatically. Manufacture-for-stock is reduced or eliminated in favor of manufacture-to actual-demand. When a lean team has redesigned the process, an implementation event, or kiazen event, is planned to execute the changes.

Kiazen events usually take one to several days of intense work. When the event is complete, production resumes using the new lean production flow. It is common for lean teams to shorten manufacturing times, free floor-space, reduce in-process part movement and shrink (or eliminate) inventories. Compelling evidence shows that firms, large and small, benefit from implementing lean principles.

Nothing rivals the excitement and energy generated during the early stages of a lean journey. You will feel great about gathering your employees for training, forming lean teams and redesigning your value stream maps, and everyone will be eager to participate in the initial kiazen events. The optimism is intoxicating. Soon, however, you will face the task of measuring the progress of your lean initiatives.

Challenges measuring lean initiatives

Looking to your standard financial statements in the first few months of a lean journey is likely to give you a confusing picture. Unfortunately, standard accounting methods don’t reflect the progress made by lean teams in the early stages.

Costs associated with training employees, reconfiguring production space, relocating inventory, and conducting kiazen events all hit the profit and loss statement immediately. Liquidating excess inventory, an important initiative in lean, may hit profit margins and increase trade accounts receivable in the short-term.

Worthwhile lean projects that may not result in significant costs, such as clearing production floor-space and establishing point-of-use inventory locations, may not result in immediate cost decreases (rent or depreciation).

If that isn’t enough, standard production cost accounting methods actually reward operations managers for over-producing. Often, manufacturing overhead allocations are based on direct labor hours and other activity-based metrics.

When lean teams work to reduce excess inventory, production quantities may decline, direct labor hours and other metrics may decline and create unfavorable absorption variances. When new, lean production processes are implemented and production is limited to actual customer demand, unfavorable variances may persist.

The good news is that variable manufacturing costs can be reduced immediately; however, it takes time for you to reduce semi-variable and fixed costs that make up the manufacturing overhead pool.

When your generally accepted accounting principles (GAAP) financial statements and traditional product cost reports don’t represent the early progress being made, it’s easy to be distracted from the ultimate goal. To keep your direction and focus, develop a system of specific measures that will ultimately drive broader measures of performance.

Use specific measures to motivate

It is necessary, especially at the beginning of a lean journey, that you implement a system of measurements that can be communicated back to your lean teams. Specific measures and short-term incentives based on achievement are key tools to motivate your lean teams to exert extra effort, develop creative ideas, and to challenge inefficient but deeply entrenched processes.

These measurements will encourage you and your staff to keep driving the right events even when your financial statements do not yet show the fruits of your labor. The benefits of implementing lean principles will, in time, improve your financial statements and become a testament of your leadership skills.

Considerations in measuring lean

Shareholders, owners, partners and other financial stakeholders all rely on your financial statements to measure the performance of your operation. It’s a great advantage when you can link the benefits of your lean activities directly to improving numbers and trends from your audited or reviewed statements.

This is especially true if your business needs to acquire new, more efficient equipment through financing. Consider preparing a three-tiered reporting pack that links production-floor activities to broader performance measures that drive financial metrics.

The first tier reporting can be used to summarize each kiazen event. The summary should include a brief description of the event and how the changes implemented are expected to benefit either the profit and loss statement or balance sheet. (For example, the event may reduce costs or lower inventory.)

The expected cost and benefit of the event can be estimated with your accountant, but the estimate need not comply with traditional accounting rules. One of the benefits of documenting specific kiazen events is that it allows lean champions to later revisit the event and check if the results are meeting or exceeding the estimate.

The second tier can present monthly lean team metrics that don’t show up on financial statements, but will drive the top-tier metrics directly derived from the financial statements. Examples of middle-tier metrics to support inventory reduction metrics include takt time, consigned inventory value, and JIT supplier performance.

The top tier should contain four to six broad measurements of business performance that can be derived with at least one key piece of information from the financial statements such as sales per employee, inventory turns, return on net assets, return on sales, profit to operating cash conversion ratio, and gross profit margin.

Your vision and focus will become evident over time. One of the most significant and often immeasurable benefits of implementing lean, however, is the ability to take advantage of market opportunities in your industry. Lean initiatives can provide your company with additional capacity to capture new customers and make solid gains in market share.

This reporting pack proposal will help you concentrate on the proper metrics early in your lean journey. If you maintain focus, your business will gain a substantial advantage against your competition through operational excellence and market leadership.

Chris Bryan is a CPA and CFE with Christopher S. Bryan CPA, Inc. offering CFO services and fraud prevention services to local and national clients. He is a six-year veteran of measuring and reporting the lean journey. He can be contacted at 904-437-7022, cbryan@christophersbryancpa.com or through www.christophersbryancpa.com.

By Pete Lamson

The digital age is in full force and ledger sheets, receipt books and cash registers are a distant memory. Today, small businesses have shifted to accounting software, customer relationship management applications and point-of-sale devices to accelerate operations, improve accuracy, and ultimately to ensure their business runs as smoothly as possible—generating tons of valuable data about their businesses.

Unfortunately, this shift means all this important data is vulnerable to viruses, malicious hackers, physical damage or simply leaving your laptop behind at the coffee house.

The risk of losing your company’s most valuable asset—your business data— is real. And running your business is competitive enough without the hassle of lost files. Losing your data means potentially losing your business. Yet surprisingly, 86% of small businesses are relying on antiquated backup methods (Carbonite Inc., December 2010 SMB Data Backup Study).

Data is vulnerable

A 2011 study conducted by Carbonite Inc. uncovered that 48% of small businesses have lost digital documents or other records—up from 42% since 2010.

These businesses noted that the major ways they lost information were hardware or software failure (54%), accidental file deletion (54%), computer virus damage (33%), and theft of computers or stored data (10%).

Data catastrophe also can occur from fire, hurricane, flood, tornado or earthquake. While buildings are replaceable, lost information about your finances, your inventory, your customers, and even your email often is not.

Protecting business data

Your business’s data is its lifeline and this vital information must be backed up. Though many of you are backing up in some manner today, the reality is that copying your files onto physical devices like external hard drives or USBs is not a complete solution and does not ensure you can retrieve your files if and when needed.

When using devices like external hard drives, CDs, DVDs or USB/flash memory sticks, the backup is actually only the first step. All these drives or disks must also be removed from the business premises every night and returned every morning.

If not, anything that should happen onsite—from fire to theft—could wipe out both your original files and the backup. Even if these steps keep your backups current and separate from the originals, those hard drives and memory sticks are still vulnerable to theft, tampering or loss.

Backup with the cloud

Fortunately, technology has developed a solution, and it resides in the “cloud.” For a small fee, commercial services enable you to store copies of your files online—on tightly secured servers operated by companies dedicated to backing up business files. These services offer more than just storage; they make backing up convenient and time-efficient.

Easy-to-use, cloud-based methods aren’t vulnerable to the problems associated with those antiquated backup methods. Once you realize you need to better protect your data and ultimately your business, you need to choose the right online backup solution.

Choosing the cloud solution for your business

Here are six key capabilities to look for when trusting your files to online services for backup and restoration in case your computers crash, burn or just die:

1. Affordability. The best services may cost only $229 a year to back up an unlimited number of computers in your company. This is a predictable, sustainable cost you can plan for. It’s really the lowest insurance premium you’ll keep on your books, and it protects the most valuable asset in your business—your data.

2. Automatic backup. The files on your business computers should be copied and stored on a cloud-based server without you needing to do anything but register with the service. As you create new files or edit existing documents, the files should back up automatically.

3. Easy restoration. With online backup, you no longer need to worry about transporting your backup files daily. The cloud-based servers are far removed from your location, so if something unfortunate did happen onsite, you could retrieve the data you created on your computers. The service you choose should enable you to simply boot up a new computer, connect to the Internet, visit where your files are stored, and download your files. The best cloud-based backup services will even place your restored files in the same folders in the same locations as they were on your original computer.

4. Anywhere, anytime access. You don’t need to suffer a disaster to be saved by online backup. The best backup services allow you to retrieve whatever files you need by accessing it from your laptop computer or smartphone. Now, when you are with a customer offsite and realize you urgently need a particular file to document an action you have taken or an invoice you sent, you can have it on hand.

5. No extra equipment. You should only need to register and download a small piece of software that lets you retrieve or restore your files. Everything else should happen automatically.

6. Security. Most cloud-based backup companies encrypt every byte of data throughout the complete process—uploading, storing and downloading a file from the cloud. It’s the same secure technology that banks use for their online operations.

Once you have an online backup service in place, you will have safe, certain, anytime-anywhere access to your files. If your business expands, you can extend your backup service to more computers or locations.

Knowing that your company’s data is backed up properly can provide you with the peace of mind you need to focus on running your business. You have a responsibility to your business, your employees, your customers and yourself to consider the impact of data loss and to take action to implement a backup procedure that fits your company’s needs. You can get started in minutes and be protected from whatever lies ahead.

Pete Lamson is senior vice president and general manager of the small business group at Carbonite, a leading provider of online backup solutions for consumers and small- to medium-sized businesses. More than 1.1 million subscribers in over 100 countries rely on Carbonite to provide easy-to-use, affordable, unlimited and secure online backup solutions with anytime, anywhere data access. For information on Carbonite, visit www.carbonite.com.

By Lewis Hunter

As a business owner, you are accustomed to, and perhaps even thrive upon, solving today’s pressing problems and pushing on totomorrow. But have you looked beyond this week, this month, or even this year?

The average owner spends 80,000 hours building their company but only six hours planning its transfer. As a result, 80% of business owners fail to get top dollar when they sell. That is like winning a free lottery ticket on a drawing for a $1 million jackpot—you may have won, but you missed out on a much bigger prize.

Just as winning the lottery is not a viable strategy for achieving your dreams, nor is hoping that you will sell your business for enough money to support your future lifestyle.

Use a business transition plan to control your exit and maximize your payout. Plan now when you will exit, how and for how much, rather than leaving it to chance.

Analyze your current situation

As with any journey, you must know where you are before you can determine where you are going. Transition planning involves reviewing your business and personal life.

Review your personal finances; focusing on the wealth gap you must close to support your goals for life after your business. If you want to retire, how much money will you need and what price would you have to sell your business for to net that amount?

For your business, document your vision and strategy for the company. Identify critical success factors and measure performance against them through operational metrics. Undertake legal and taxation reviews to ensure compliance with regulations and to protect against risks.

Identify your objectives

Set clear, measurable, attainable objectives for your life after your business, and your business’s life after you.

Business owners typically start planning transitions for one of three reasons:

•A personal health scare, or death or illness of someone close to them, has reminded the owner of their own mortality. They contemplate what would happen to their business and their loved ones if they suddenly stopped working.

•The owner has tired of their work and wants to do something different, such as go into public service or spend more time with friends and family.

•They desire to leave a legacy, ensuring the company survives them and that their work continues to benefit others.

Don’t wait for one of these to occur. Identify your long-term financial and lifestyle needs, the needs of family and stakeholders, and your desired business legacy.

Select your options

Whether you will transfer your business, continue working or retire, there are many ways to accomplish your objectives. Some options to consider and factors to review:

•Internal transfer—Consider whether the next owner(s) would be capable of running the business. Be impartial, even if they are one or more of your children or a long-time employee. Also, ensure you achieve your personal financial goals without irreparably impairing the company. Use trusts, buy/sell agreements, employee stock ownership plans or management buyouts, for example.

•External transfer—Your influence over your company’s future may wane with an outside buyer. Their plan should align with your vision for the business and the needs of your stakeholders, including employees and customers. Would the buyer be making a strategic acquisition with the intent of operating, and perhaps growing, the business over time? Or would they be a financial purchaser, hoping to squeeze cash and profit from a future sale? Will you solicit bids for the company or negotiate with a single prospective buyer?

Identify the options available to you and evaluate each one based on your objectives. Choose one and put a contingency plan in place so the business can operate and your personal goals can be achieved if you cannot complete the transition as hoped, perhaps due to health or performance issues. Use insurance and legal protections.

Create your plan

When will you transition and for how much? What will the acquirer look like? How will your family’s and stakeholder’s needs be met? Compile the answers in your plan and state how you will attain your objectives. Be specific.

The wealth gap between what your business is worth and what you need to sell it for can provide your timeline. If it is worth $1 million today and you need to sell it for $2 million, will it take three years to close the gap? Five?

Decrease the company’s dependence upon you. Allow time to build business value by grooming leaders, implementing systems, improving processes and increasing revenues and profits.

Your transition should occur when you want and in your accordance with your wishes for the future ownership of the business and at a value that fulfills your wealth objectives. Spell out roles and responsibilities for key individuals, draft the management structure, and detail how you will be paid.

When your transition plan is complete, break it down further into tasks with due dates and responsibilities assigned.

Create your plan, build your business’s value and transition when you are ready—then you won’t need to win the lottery to achieve your dreams.

Lewis Hunter is a Jacksonville-based business transition specialist with ROCG Americas, LLC, an international consulting firm that helps owners of small- and medium-sized companies start, build and exit. He can be reached at 904-400-6610, lewis.hunter@rocg.com, or through http://business-transition.com/.

Get ready

•Set up a team of advisors.

•Draft a letter to your spouse or loved one, stating whom to contact and what to do if you die or are incapacitated before you transition.

•Perform a business valuation.

•Measure the wealth gap between your company’s current value and what you need to sell it for to achieve your personal financial goals.

•Create your transition plan.

•Optimize your business.

•Build business value by eliminating the company’s dependency on you as much as possible.

By Dr. Earl Eye

The dream of business success captures the imagination of aspiring and existing business owners everywhere. A vision of flowing profits, industry respect, thrilled customers, and a balanced life permeates your consciousness and keeps you motivated.

As an entrepreneur, time is your most valuable asset—yet it’s the only part of your existence you can’t leverage. You only have so much of it in your day and you can’t add more to those 24 hours, no matter what you do or what you pay.

You may think you’re doing your business a favor by sacrificing sleep, diet, and an exercise program, but the truth is you’re not. While it may seem counter intuitive, spending a little less time at the office and redirecting it toward optimizing your health may be just the ticket to achieving your professional aspirations.

Steps to optimal health

Three areas in which you can take some simple and time-conscious steps to optimize your health include:

•Sleep. When you’re tired, your ability to work productively and think clearly may suffer, which could lead to dangerous or costly mistakes and take a toll on your professional reputation.

Poor sleep can make it difficult to multi-task, make you slower to get your work done, and some people report it affects creative thinking and memory. Some ways to reduce insomnia include:

Taking melatonin. Melatonin is a hormone that helps regulate sleep, and as you age, your body produces less and less. It doesn’t cause dependence or addiction and as a side benefit, it naturally increases your body’s growth hormone production.

Sleeping no more than seven hours. Most people need no more than seven and a half hours, but if you cut back to seven, you’ll have sounder sleep with fewer awakenings.

Getting up at the same time every morning. Your body rhythms are tied to the time you awaken, so it’s important to keep it constant. That means not oversleeping on weekends.

Getting into bed only when you’re sleepy. Spending time awake in bed can make you anxious and can lead you to associate your bed with anxiety. If you can’t drop off to sleep after 15 minutes, try slow deep breaths. If you reach 200 breaths go to another room and do something relaxing such as reading a book until you are sleepy.

•Nutrition. Nutrition isn’t about a single “perfect” diet. For thousands of years, human diets were simple: We ate what grew from the ground, fell from the trees, ran across our path or swam the waters.

The diet most synergistic with our Paleolithic-era ancestors: high in nutrient-dense foods (fruits, vegetables, lean meats and essential fats) and low in refined, overly processed foods, fats and simple carbohydrates.

To improve upon your eating habits, try:

Choosing natural foods. If it grows from the ground, falls from the trees, runs, flies, swims, it is an optimal choice. Best of all, natural foods such as fruits and veggies are most nutritional in the raw, making them quick and easy to prepare. If you must eat packaged foods, choose those that are minimally processed.

Eating once every three to four hours. Your metabolism is like an engine—the more often you give it fuel, the better it works. When you deprive your body of food, it shuts down to preserve energy. Good examples of some snacks to eat in between meals are nuts, cottage cheese, or jerky.

Taking supplements. Supplements are a quick and easy way to ensure your body is getting all of the necessary nutrients it needs to be healthy. Research is constantly demonstrating that truly therapeutic doses of vitamins and minerals and anti-oxidants—the amounts needed to reduce the risk for various diseases—are substantially higher than the RDAs.

•Exercise. All you need is 30 minutes a day to optimize your health. If you don’t know the first thing about exercising, hire a trainer once or twice to teach you the basics.

Set aside time each day for an activity that you enjoy, such as practicing yoga or lifting some weights. Better yet, discover activities where you can get exercise and spend quality time with your partner, family or friends—such as tennis, hiking, or dancing.

Weight training is the best way to burn fat; it’s more effective for losing weight than aerobic activity because it burns calories while you’re exercising and at rest. Here’s the math: The body requires approximately 30-50 calories daily, per pound of muscle. When you add five pounds of lean muscle, you’ll burn an additional 150-250 calories every day, even on days you don’t exercise. This adds up to 15 to 26 pounds of fat loss every year.

Do some high intensity endurance exercises, which is at least 12-15 minutes of pushing your body to the limit of its capabilities. Interval training is the best way to get a rigorous workout quickly. Using a treadmill or elliptical, start at a low to moderate pace for one minute, then up your speed to an all-out sprint for 30 seconds, then back down to the moderate pace for one minute, and then back up to a sprint for another 30 seconds. Do this five times. An alternate would be using telephone poles. Sprint in between two, then walk between the next two, and repeat.

The most serious thing that could happen is the loss of your productivity—which ultimately not only affects you, but also your business, employees, family and loved ones.

It’s much better to work for seven hours a day at peak performance than for 10 hours a day at half-consciousness. Get on a good diet, a good workout plan, and get plenty of sleep. It’s fine to be off balance sometimes, but never forget the adage, “Sound body; sound mind.”

Dr. Earl Eye is an AMA certified age-management specialist at Cenegenics Jacksonville, a practice committed to helping patients maintain health and live well longer. He is an institute physician at Cenegenics’ corporate headquarters and is the CEO and CMO of Cenegenics Jacksonville. Dr. Eye is also board certified in critical care medicine, infectious diseases medicine, pulmonary medicine, and internal medicine. He can be reached at 904-674-0404, contact@cenegenicsjax.com, or through www.cenegenicsjax.com.

By Mark Bajalia, Esq.

As a business owner, you will very likely need to make a claim under one of your insurance policies at some point. If you do, you may receive a “reservation of rights” letter from your insurer.

A reservation of rights letter often leaves insured parties confused and unsure about how to respond; however, you will find information about what a reservation of rights letter is and the various options and opportunities it presents for an insured party follows.

What it is

A reservation of rights letter does not necessarily mean the claim is not covered under the insurance policy. It does mean that the insurer thinks it may have grounds to deny coverage for some part of the claim or the entire claim. For example: Most policies have what is called an “intentional acts” exclusion. If it appears that the damages or injuries were the result of an intentional act on the part of the insured party, then the insurer may send a reservation of rights letter indicating that, under the terms of the policy, it may have grounds to deny coverage.

In some cases there may be claims that are covered and claims that are not and the insurer may send a reservation of rights letter indicating that it is providing coverage for only a portion of the claim.

Why they are sent

Insurers send reservations of rights letters to keep their options open. If the insurer does not reserve its rights and provides a defense to the claim, but later discovers that circumstances exist that trigger an exclusion or otherwise call into question coverage under the policy, then the insurer will be stopped from raising a coverage defense.

Under those circumstances, courts could, and have, said that the acts of the insurer in providing a defense without reserving its rights constitutes a waiver of its right to deny coverage. Thus, rather than deny coverage outright, the insurer will send a reservation of rights letter and keep its options open.

Essentially, the insurer is letting the insured party know there is going to be an investigation but is preserving its right to deny coverage if the investigation shows that it is not a covered loss.

What are your options?

You have several options when you receive a reservation of rights letter:

•Ignore it: The insurer may be correct in reserving its rights as to part of the claim.

•Dispute the reservation: As the insured party, if you disagree with the reservation of rights and your insurer’s interpretation of the policy language, you should go “on record” that you dispute the reservation and set forth the reasons that you dispute it.

You should also send it to the claims representative by certified mail and request a response. This will cause the insurer to reassess its position and even if the insurer’s position does not change, you have created a paper trail, which may be useful if the coverage dispute ends up in court.

•Ask for more information: Some insurers will intentionally keep the reservation of rights letter vague to keep their options open. An insured party should counter by asking for specifics as to the purported basis for the coverage issue and the rationale for it.

•Start the clock: Once an insurer reserves its rights, it must eventually declare whether or not it is going to provide coverage for the loss. If the insurer continues to investigate the claim but never conclusively disclaims or accepts coverage within a reasonable time frame, then the insurer may be stopped from doing so. Keep following up with the insurer and periodically ask the insurer to state its position.

•Explore new opportunities: If an insurer reserves its rights, you may have the right to hire your own lawyer to defend the claim, not one picked by the insurer. The insurer will nevertheless be required to pay for your lawyer of choice.

Courts have said that when an insurer hires a lawyer for the insured party, it creates an inherent conflict of interest, which may allow the insured to retain its own counsel. Thus, when confronted with a reservation of rights, it may create an opportunity for the insured party that didn’t previously exist.

•Seek a declaratory judgment: Despite the reservation of rights, if you or your attorney feels that coverage for the loss does exist, then you can seek to have a court review the policy language and the facts as presented and make a determination as to whether coverage exists.

In essence, you are asking the court to “declare” what the policy language means and whether coverage exists. This forces the insurer to address the coverage issues before proceeding on the merits of the underlying lawsuit or claim. The prospect of spending more on legal fees to defend itself in a declaratory judgment action may also encourage the insurer to go ahead and provide coverage and defend the claim.

If you feel strongly that the insurer is reserving its rights on false grounds, you may want to sue the insurer for breach of contract and bad faith claims handling as well. Ultimately you need to understand your rights and protect your rights when you receive a reservation of rights. When in doubt, consult an attorney with experience dealing with insurance matters.

Mark Bajalia is a partner and a managing member in Brennan, Manna & Diamond’s Jacksonville office. He is an experienced commercial, business and insurance litigator, having prosecuted and defended numerous cases in state and federal courts and in arbitration. He is rated AV Preeminent by Martindale Hubble, has been recognized as one of Florida’s Legal Elite by “Florida Trend” Magazine and has been selected as a Florida Super Lawyer in the field of business and insurance litigation.

By John Geshay

Being a certified business coach who works with small business owners, it is not uncommon to hear from them that they  have little to no time to work on the “bigger picture” items of their business. They almost always say they were too busy addressing everyday product and or service issues and employee and customer requests to do it.

What can you do to get out of this day-to-day struggle you may constantly find yourself in? Two ways to get out of this struggle is to improve your business focus and delegate certain job responsibilities.

Enhance your business focus

From within the “Effectiveness” module of Brian Tracy’s coaching program, Tracy outlines a seven step exercise to help you improve your business focus:

Step 1: You must first identify your 10 most important goals. From your subcategory of “business goals,” list the top 10 and commit them to memory.

Step 2: Determine your current hourly rate. To do this, take your current annual income and divide by average annual hours worked. For instance, if current annual income is $150,000, and you worked 2,000 hours, then your current hourly rate = $75/hr.

Step 3: Identify your desired hourly rate. If your desired annual income is $250,000, then your desired hourly rate at 2,000 hours is $125/hr.

Step 4: For one week, keep a detailed list of how you spent your time. Use time sheets like those used by lawyers and accountants, logging your time in 10-minute or 15-minute segments. This may require a great deal of self-discipline as entrepreneurs think in terms of results not hours, however, stick with it. See this as an investment that can pay enormous dividends.

Step 5: Rank all of your activities and tasks on the list. Each evening of that week, carefully review your time sheet and mark each task you performed with a ranking of one to 10 (one being the highest value, 10 being the lowest) based on your evaluation of how important that activity was in contributing to the achievement of your 10 most important business goals.

Step 6: Now with the perspective of five days’ worth of tracking your activities, segment the list to include:

•Your 20%, high value activities (1′s and 2′s),

•Activities for which you would pay your current hourly rate (could be the 4’s to 7’s),

•Activities for which you would pay your desired hourly rate (can be a 1, or 2’s to 3’s), and

•Your low value activities (7’s to 10’s).

Step 7: Focus your own time on the 20%, high value activities. Moving forward, resolve to spend as much time as possible on your high value activities—the 20% that contribute most to the achievement of your most important business goals, and those for which you would be willing to pay someone your current or even your desired hourly rate to accomplish, and to delegate or eliminate as many of your low value (7 to 10) activities as possible.

Delegate, delegate, delegate!

Some business owners say they pride themselves on the fact they are copied on every email regarding their company, but much of that really comes from the fact they don’t think anyone could do the tasks as well as they can.

By not delegating, however, their own strategic business goals are not being accomplished because they have zero time to work on them. If you’re struggling with this same issue, don’t trust your team, feel you must control everything, and are not hitting your own goals, then commit to delegating.

From your lists of high and low value activities, select one activity or task that does not represent the highest and best use of your time but that is nevertheless important to the success of your business. While not everything goes overboard initially, just try one or two to start. Commit to delegating this activity or task to a person who is qualified to carry it out.

List the skills and experience necessary to efficiently and effectively carry out this activity or task and find someone who possesses them. Look around. Who in your group has shown these qualifications and might be available? The person may be a member of your staff, or they could also be a contractor to whom you could outsource.

Clearly define the activity or task you will delegate and describe in detail the results you expect when the delegated task has been successfully completed.  Provide a deadline for successful completion of the delegated activity or task, with benchmarks, or short-term results, by which you will measure the progress of the delegated activity or task.

Determine which resources will be required to efficiently and effectively carry out the delegated activity or task, and what the rewards and consequences will be for the person to whom you delegate the activity or task when he/she successfully or unsuccessfully completes it.

Improving continues

Continue to list your daily and weekly tasks, evaluate those tasks, and determine who might be the best fit to help you have more time for the bigger things in your business.

Improving your business focus and learning to delegate can help you have more time to focus on the “bigger picture” of your business and get you accomplishing your strategic business goals.

Now, go delegate and be successful!

John Geshay is a certified business coach and area developer with FocalPoint of Florida. He can be reached at 904-923-1246, jgeshay@focalpointcoaching.com, or through www.focalpointcoaching.com and www.linkedin.com/in/jgeshay.